Fit for Growth insurance survey

How do carriers navigate stormy waters? Steady as she goes, or steer into the headwinds?

The confidence game

The US insurance market is mature and growing at a very slow rate; from 2011-2015, the P&C industry grew at a rate of 3.4% CAGR, while life and health grew at a rate of 1.4%. However, when we asked carriers about the expected compound annual growth rate for their companies over the next three years, they were much more sanguine about their growth rates. 63% of respondents indicated that they would grow at rates greater than 5%, while 15% were targeting growth rates above 10%.

At many companies, inadequate expense management is affecting spending on key strategic initiatives. Without more than a “business as usual” commitment to expense management, it’s actually going to be very hard to grow.


The market forces at play


Insurers are concerned with balancing growth and expense management. Few carriers are willing to declare victory in the war against expenses. Companies appear to be working on expenses as a priority, but we think it has become business as usual. It is always on the agenda and is always being addressed but is never a true driver in strategic decision-making.

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Some carriers have institutionalized expense management and are out engaged in some kind of tactical expense program year in-year out. These programs tend to be managed in the context of the 3-year planning process and annual budget. They focus on squeezing discretionary spending or executing blanket budget cuts across all departments, or focus on expense levers such as adjusting spans of control and eliminating management layers.

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Over time, expense programs that are routine or tactical tend not to permanently adjust spend-levels or change competitive positioning. Expense levels have a way of coming back. Something more structural is often needed.

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Insurers have told us that expense cuts typically do not stick and that expenses chronically come back. Our work with the industry points to the need to look at structural and operating model changes in concert with more tactical changes to make sure that cuts occur in the right places, and that dollars saved are invested into building future capabilities.

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"Overall, insurance is a low growth industry and barely keeps expenses in line. We continue to believe that virtually every company needs to achieve sustainable cost savings so that they can channel investment into the areas that will fuel growth.”

Bruce Brodie – Insurance Fit for Growth leader

Contact us

Bruce Brodie

Managing Director, Insurance Strategy, PwC US

Bonnie Majumdar

Manager, Insurance Advisory Services, PwC US

John Dixon

Insurance Advisory Services Manager, PwC US

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